Case Note & Summary
These civil appeals arose from special leave against a common judgment of a Division Bench of the Patna High Court dismissing three writ petitions. The appellants were distillery licensees under the Bihar Excise Act, 1915; the respondents were the State of Bihar and excise authorities. The dispute concerned demands for establishment charges under Rule 9 of the Bihar & Orissa Excise Rules, 1919, which required distilleries licensed solely for manufacture of denatured spirit or other commercial spirit to bear the whole cost of excise staff posted for supervision. The appellant in Civil Appeal Nos.4762-63 of 1996 held licences for two distilleries at Lauriya and Mirganj in Bihar, under Forms 19, 19-A, 25, 27, 28, and 28-A, covering compounding and blending foreign liquor, sacramental wine, denatured spirit, wholesale country spirit, and manufacture of spirit for chemical and industrial purposes. Forms 27 and 28 were withdrawn from 1 April 1979. The Superintendent of Excise directed payment of Rs.1,68,128.77 towards establishment charges for excise staff at Lauriya from March 1973 to July 1979 and at Mirganj for 1975-76 to 1978-79. The appellant in Civil Appeal No.4764 of 1996 operated a distillery at Sultanganj, Bhagalpur, manufacturing country spirit under Forms 25, 27, 28, and 28-A, and challenged a demand memorandum dated 5 November 1976 and orders of the Commissioner of Excise dated 27 September 1978 and Member, Board of Revenue dated 27 December 1979. Before the High Court, appellants argued that Rule 9 was ultra vires the Bihar Excise Act and, alternatively, did not apply to composite distilleries manufacturing both denatured/industrial spirit and potable liquor. The High Court rejected the ultra vires contention, held Rule 9 not beyond the Act, but did not render a clear finding on the alternative applicability contention, and dismissed the writ petitions. Before the Supreme Court, the appellants reiterated that Rule 9 lacked statutory basis and on its express language could not apply to their distilleries because they were not licensed solely for denatured or commercial spirit. Respondents argued Rule 9 was sustainable under Section 38 of the Bihar Excise Act, 1915 and was framed under Section 90 rule-making power to prevent illegal conversion of denatured spirit into potable liquor and to protect public interest. Respondents further submitted that the words 'denatured spirit or any other commercial spirit' should be read as 'denatured spirit and any other commercial spirit' to include all potable spirit sold commercially. The Supreme Court identified two points for determination: first, whether Rule 9 was ultra vires; second, whether the second part of Rule 9 applied to distilleries manufacturing denatured/industrial spirit as well as potable liquor. The court noted the statutory scheme: Section 2 definitions of liquor, spirit, intoxicant, and denatured spirit; Section 13 licensing manufacture of intoxicants; Section 15 establishment of distilleries; Section 22 exclusive privilege; Section 27 excise duty; and Section 38 fees and conditions for licences. It observed that a conjoint reading of Section 38(1)(a)(ii), Section 13, and Section 15 showed licences could be subject to restrictions and conditions as the Board directed. The court also traced the rule-making power under Section 90 and the 1930 amendment adding the second part to Rule 9. The available excerpt concluded before final decision, so the final holding and directions were not provided.
Headnote
A) Excise Law - Delegated Legislation - Validity of Rule 9 of Bihar & Orissa Excise Rules, 1919 - Bihar Excise Act, 1915, Sections 38, 90 - Appellants contended that Rule 9 lacked statutory basis. The court examined that Section 38(1)(a)(ii) permits licences to be subject to restrictions and conditions as the Board directs and Section 90 empowers the Board to make rules for regulation, inspection, supervision, management, and control of any place for manufacture of intoxicants. Rule 9 as amended in 1930 required distillers licensed solely for denatured or commercial spirit to bear the whole cost of excise staff for proper supervision. The court was analyzing whether the rule traced its origin to statutory provisions. B) Excise Law - Statutory Interpretation - Scope of 'denatured spirit or any other commercial spirit' - Bihar & Orissa Excise Rules, 1919, Rule 9 - Appellants argued that composite distilleries manufacturing potable liquor were outside the second part of Rule 9. Respondents argued that 'or' could be read as 'and' to include all commercial spirit including potable liquor. The court considered definitions of spirit, liquor, and intoxicant under Bihar Excise Act, 1915 and the text of Rule 9.
Issue of Consideration
Whether Rule 9 of Bihar & Orissa Excise Rules, 1919 is ultra vires the Bihar Excise Act, 1915; and whether the second part of Rule 9 imposing establishment costs applies to distilleries manufacturing not only denatured spirit and spirit for industrial use but also potable liquor for human consumption.
Final Decision
Final decision of the Supreme Court was not contained in the available text; the High Court had dismissed the writ petitions and the Supreme Court was considering the two points for determination.
Law Points
- Rule 9 of Bihar & Orissa Excise Rules
- 1919 requires a distiller licensed solely for manufacture of denatured spirit or any other commercial spirit to bear the whole cost of excise staff for proper supervision
- Section 38 of Bihar Excise Act
- 1915 enables licences to be granted subject to restrictions and conditions as the Board directs
- Section 90 of Bihar Excise Act
- 1915 empowers the Board to make rules for regulation
- inspection
- supervision
- management and control of any place for manufacture of intoxicants
- Definition of spirit includes any liquor containing alcohol obtained by distillation whether denatured or not
- Definition of intoxicant includes any liquor or substance from which liquor may be distilled declared by State Government
- Section 13 of Bihar Excise Act
- 1915 requires licence for manufacturing intoxicants
- Section 15 of Bihar Excise Act
- 1915 authorises establishment of distilleries under licence granted under Section 13
